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US curbs on investments will 'hurt' all

By  Fan Feifei in Beijing  and Zhao Huanxin in Washington | chinadaily.com.cn | Updated: 2023-08-10 23:27

Relations: 'Decoupling' seen as infeasible

The United States' latest move to restrict critical technology investments in China spells havoc for international economic and trade cooperation, severely undermines the stability of global industrial and supply chains, and hurts the interests of companies and investors of both countries, officials and experts said on Thursday.

Although Washington has shifted to the term "de-risking" from the earlier "decoupling" in key supply chains, what it actually is doing is repeatedly "decoupling and severing supply chains" from China, and attempting to contain the rise of Chinese high-tech sector even at a heavy cost to US companies, industry insiders noted.

Their comments came as US President Joe Biden signed an executive order on Wednesday to block and regulate US-based high-tech investments going toward China. The order, which is expected to be implemented next year, targets investment in semiconductors and microelectronics, quantum computing technologies and artificial intelligence.

The Ministry of Commerce said in a statement on Thursday that China is seriously concerned about the order and reserves the right to take measures.

The US is restricting the outbound investments by its companies and is pushing for "decoupling and severing supply chains" in the investment field under the guise of "de-risking", which seriously deviates from the market economy and fair competition principles the US has always advocated, and affects companies' normal operation decisions, the ministry said on its official website.

"We hope the US side respects the laws of the market economy and the principles of fair competition, and does not artificially impede global economic and trade exchanges and cooperation, and does not create obstacles for the recovery and growth of the world economy," the statement said.

Bai Ming, deputy director of international market research at the Chinese Academy of International Trade and Economic Cooperation, said the new investment restrictions indicate that Washington is taking a "systematic" approach to contain China's technological development, ranging from putting Chinese companies on its export control list and levying additional tariffs on Chinese goods, to restricting US investments in high-tech industry in China.

The US government has replaced "decoupling" with "de-risking", but change in words does not mean a difference in action, he noted, emphasizing that any intention of "decoupling" from China is not feasible as the country is playing an irreplaceable and pivotal role in global industrial and supply chains.

The Foreign Ministry said on Thursday that China urges the US to fulfill its commitment of having no intention to "decouple" from China or obstruct its economic development. The US should stop politicizing, instrumentalizing and weaponizing tech and trade issues.

It said the US should revoke this decision and remove the restrictions on investments.

The Biden administration's order came at a time when tensions between the two largest economies have just started showing signs of easing, following recent trips to Beijing by US Secretary of State Antony Blinken, US Treasury Secretary Janet Yellen and US Presidential Special Climate Envoy John Kerry.

While the visits and talks served to stabilize the relations between China and the US, the executive order may challenge prospects for a stable relationship at a critical juncture, said William C. Kirby, T.M. Chang Professor of China Studies at Harvard University.

Kirby said he hoped the "broad progress" in stabilizing the US-China relationship in recent months is not stymied by the new order. He said that Washington's move will "very likely" invite Beijing to respond in kind.

China is the largest market for semiconductors, accounting for 36 percent of sales for US companies, said the US-based Semiconductor Industry Association.

The lobbying group responded cautiously to the new order on outbound investment screening, saying that it is assessing the move while welcoming the opportunity to give feedback.

"We hope the final rules allow US chip firms to compete on a level-playing field and access key markets, including China, to promote the long-term strength of the US semiconductor industry and our ability to out-innovate global competitors," the association said.

The once-attractive Chinese tech industry for US venture capital has seen a decline in such investments due to escalating geopolitical tensions. Data from research company PitchBook revealed that US-based venture capital investment in China fell from $32.9 billion in 2021 to $9.7 billion in 2022.

Xiang Ligang, director-general of the Information Consumption Alliance, a telecommunications industry association, said, "The investment restrictions aimed at containing the rise of China's high-tech sector will motivate Chinese enterprises to double down on indigenous innovation and achieve breakthroughs in key technologies."

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